Cash and carry: Five way to pay when you’re overseas

Travelling Well | Michael Gebicki | Posted on 15 August 2019

Keep your cash safe. These are five of the smartest ways to travel with money.

In the past, getting cash for your travels was simple. You trotted into a bank or travel agency, bought travellers’ cheques, topped them off with a fistful of francs and off you went. In the digital era, travellers’ cheques have gone the way of propeller-powered aircraft and there are many more ways to pay for your travels. If you want to stretch your holiday dollars, here are a few things you need to know. 

Woman sitting in picturesque square paying for meal using her phone

How to carry cash overseas

Brass in your pocket

You can usually buy foreign currency at the airport when you leave Australia, but you can get 5 to 10 per cent more if you buy it before you pack your bags. There are now several websites where you can order foreign currency online at a decent rate including Travel Money Oz and Travelex, with convenient delivery options. 

Getting cash overseas

ATMs are everywhere and are the most convenient way to access cash overseas. In the past 12 months I’ve withdrawn cash from ATMs in India, Vanuatu, Bhutan, Ecuador and Georgia. You’ll pay a fee to the operator but that’s almost impossible to avoid unless you’re withdrawing from a bank affiliated with your card. 

Notify your financial institution that you’re going overseas, and for how long. Banks have a habit of blocking cards if they detect unusual activity from a foreign source. Travellers’ cheques are still favoured by a few and they offer security, but they are so rare these days they can be difficult to exchange. Even some banks won't touch them. 

Debit card v credit card

I use a credit card and debit card overseas. The debit card I pre-load with Australian dollars and use as a reservoir of funds from which to withdraw local currency at foreign ATMs. I use the credit card to pay hotel and restaurant bills. You can use the same cards as you use at home but most cards charge a currency conversion fee, around three per cent.

A handful of credit and debit cards charge no currency conversion fee and are the preferred cards for many frequent travellers. Examples include the Citibank Plus Mastercard Debit Card, the 28 Degrees Platinum Mastercard and the Bankwest Zero Mastercard. None of these cards charge an annual fee.


Hotel pre-authorisations

When you check into a hotel you’ll often be asked to hand over your card and an amount will be blocked against your account for every day you’re in-house. This covers the cost of any incidentals, such as laundry services or meals and drinks, that you might charge to your room, a ‘pre-authorisation’. It can be anywhere from $50 to 150 per night. Nothing is charged to your card until check-out time, but the pre-authorisation reduces your available balance. 

Use a credit card rather than a debit card for pre-authorisation, otherwise it is your funds that are being blocked, not your credit card provider’s. Plus, it can take up to two weeks for any credit to be returned to your account. Some business travellers suggest that will happen more quickly if you make a charge at your hotel, which requires the card provider to process the payment rather than sitting on the refund.

Travel money cards

Many banks and airlines promote travel money cards as the ultimate solution for travellers. You nominate how many US dollars, euros or whatever currency you need and buy those funds in Australian dollars. You can load multiple currencies onto one card and then withdraw those foreign currencies at ATMs or use the card to pay for goods and services overseas. 

Essentially they do exactly what the credit or debit card you use at home does, but they charge fees that whittle away your spending power. Some charge an initial load fee, some charge reload fees, some charge a fee for making ATM withdrawals on top of whatever the ATM operator charges. Only major world currencies can be loaded onto your card. If you withdraw cash in another currency, for example Indonesian rupiah, you’ll pay a fee of more than five per cent. If you have foreign funds left on your card when you return home you’ll pay a hefty fee for having those funds converted to Australian currency. The difference between what you paid for that foreign currency and what you get back when you redeem in Aussie dollars can be more than 10 per cent.

Financial institutions use the argument that travel money cards offer security. Since you’ve locked in the value of your Aussie dollars you’re protected if the Aussie dollar falls against the other currency. That’s true, but it’s a 50-50 bet. If the Aussie dollar rises against that other currency, you’ve lost out. 

Heading overseas? RACV Travel Insurance has you covered.